UK resident with common shares

[madbilly]

Hi all,

I've been granted some common shares in the company I work for. I'm currently UK resident and will be USA resident later this year. I believe I should file a 83(b) election and apply for an ITIN at the same time (I don't have one yet). Does that sound right?

As far as the UK goes, I believe that these are not an approved UK employee share scheme and therefore I'll be taxed on the gain from now until they are free of restrictions, pro-rata with the time I spend in the UK until then, which should only be a few months out of several years. Is anyone aware of anything I could be doing regarding the UK side of this? I'm not really looking to spend ages avoiding tax, just want to make sure I'm right by the rules.

Cheers

[DavidTreitel]

An 83(b) election is not a valid reason for applying for an ITIN. An ITIN application made on this basis will be rejected by the IRS.

[madbilly]

Hi David,

That's not the basis on which I'm applying for an ITIN, I'll actually be US tax resident later this year so I'll apply on that basis.

What about the UK part? That's the main reason I posted here.

Cheers

[darthblingbling]

The UK position is potentially pretty complex. Do you currently work remotely in the UK for your US employer?

[madbilly]

Hi Darth Blingbling,
Yes that's right. I actually work as a contractor for them at the moment whilst I wait for a US visa. The shares have already been granted to me, subject to vesting. Was my original summary roughly correct? Do I need to make any notification to HMRC immediately, or can I wait for this year's tax return?
Cheers

[darthblingbling]

It's hard to give a definite answer without seeing all documentation and doing a thorough analysis. If these are restricted in the restricted securities legislation sense then an income tax obligation could arise on each chargeable event. Have any shares vested yet? Likely some UK tax (and potentially Class 1 NIC) implications will arise and will likely be based on your tax (and NI) residency position between grant and vest.

What's the overall market value of these shares, we talking modest sums or something substantial?

[madbilly]

They're worth nothing, it's a startup.

[darthblingbling]

What are they likely to be worth on vest. Will all restrictions cease on vest?

[madbilly]

I've got no idea, it's a startup and not publicly traded so there's no market value and no forecasts that I've got insight into. I could be a billionaire or they could be scrap paper.

[darthblingbling]

Assuming all restrictions end on vest, likely position is that an income tax charge will arise on the market value of the shares at vest less any amount you've paid. Given you will be non resident during part of the 'performance period' of the shares, some apportionment will be required to account for periods where you were UK Res or non UK Res but had UK workdays. This can get quite tricky.

If restrictions remain after vest, further chargeable events may occur.

If they're readily convertible assets (i.e. is there or will there be some form of mechanism that will allow you to exchange the shares for cash) then Class 1 NIC may also arise for the periods in which you are resident for NIC purposes.

Given I assume the US employer has no presence in the UK, all these obligations will fall on you to report and pay.

Strong caveat that this is all very high level, non UK share schemes for internationally mobile employees can get very complicated and any formal advice would need to look at the underlying documentation.